The U.S. government’s failed 1890s attempt to forge unity through currency

Re:The U.S. government’s failed 1890s attempt to forge unity... by notahacker on Friday June 11, 2021 @04:57PM (#27478392)

No, the argument people are making is that the interest rates associated with forcing inflation down further increase the returns the wealthy make lending money and the price the poor and people creating jobs for the poor pay to borrow money. We already have a legislated inflation target: it's 2%. We tried screwing around with raising interest rates to whatever level was necessary to try to hold absolute dollar amounts below a certain level instead in the early Reagan years and it was a quickly-abandoned disaster.

The argument that imposing restrictions on the quantity of new assets the rich have already have lots of and the poor don't and need to borrow them would benefit the poor is the economic equivalent of positing a flat earth

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Re:The U.S. government’s failed 1890s attempt to forge unity... by dragonwriter on Friday June 11, 2021 @05:09PM (#27478527)

> We already have a legislated inflation target: it's 2%.

That’s a Fed rule of thumb long-run target, but its not legislated.

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Re:The U.S. government’s failed 1890s attempt to forge unity... by notahacker on Friday June 11, 2021 @05:31PM (#27478759)

Fair enough, strictly speaking their legislated objective only includes "stable prices" as one of their goals, but their publicly stated policy target of 2% is regarded as consistent with that legislated objective. The Bank of England's legislated objective is "price stability" alone complete with statutory responsibilities to justify all its actions in relation to that, which is also considered to be consistent with a 2% target.

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Re:The U.S. government’s failed 1890s attempt to forge unity... by dragonwriter on Friday June 11, 2021 @05:45PM (#27478889)

For the Fed (can’t speak to Bank of England), it has in legislation what is frequently referred to as a “dual mandate” of “maximum employment, stable prices and moderate long-term interest rates.” [0] The 2% Fed target explicitly is justified as balancing stability and employment.

The ECB also has a 2% target, and its asymmetric explanation of stability may explain it: “By stable prices, we mean that prices should not go up (inflation) significantly, and an ongoing period of falling prices (deflation) should also be avoided.” [0]

Note that they define stability as avoiding signficant inflation and also avoiding significant periods of (even small) deflation.

[0] https://www.ecb.europa.eu/explainers/tell-me-more/html/stabl...

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Re:The U.S. government’s failed 1890s attempt to forge unity... by imtringued on Friday June 11, 2021 @06:38PM (#27479370)

The bias towards inflation exists because it can reduce the real interest rate below 0%. Lowering interest rates below 0% is not practically possible. If we could hit negative interest rates deflation wouldn't be such a big deal.

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Re:The U.S. government’s failed 1890s attempt to forge unity... by billytetrud on Friday June 11, 2021 @08:36PM (#27480203)

If we could have negative interest rates, deflation would still happen, and people would still label it as a harbinger of bad economic times. Why? Because price deflation of a monetarily inflating currency is a symptom of an unhealthy economy. When the currency becomes a more attractive place to keep your money, it means the rest of the economy has become significantly less attractive - ie unhealthy. Deflation itself isn't what's a big deal, its the cause of deflation that is a big deal.

> The bias towards inflation exists because it can reduce the real interest rate below 0%

And why would we want such a thing? With real interest rates below 0, everyone could take a loan out, sit around and do nothing, and then collect money from the "lender" later.

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Re:The U.S. government’s failed 1890s attempt to forge unity... by billytetrud on Friday June 11, 2021 @08:40PM (#27480224)

> imposing restrictions on the quantity of new assets the rich have already have lots of and the poor don't and need to borrow them would benefit the poor

Honestly its too hard to figure out what you mean by that to really respond. How is this related to what I said?

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